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If you wear a heart monitor when exercising, here is a case for you! You can think of it as you run or bike on the trail sweeting bullets and running away from the mosquitos.

All kidding aside, Nautilus v Biosig​ was a case that practitioners--mainly patent counsel--and their invetors eagerly anticipated and ... they will be very disappointed with the end result. The question before the Court was essentially how clear must patent claims be?

Now, I am not a patent attorney, I am an attorney, business broker and valuation/appraisal geek so this is a good case to think about as I consider the value (if any) of a patent, value of the company (if any), and saleability of a business owning IP. That said, patent prosecutors earn their "bread and butter" writing the claims to uphold the application (yes, they do more than that ... but writing claims is a substantial part of the business and not doing it properly can be a problem, a big problem). The Patent Act requires that a patent specification "conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as [the] invention." 35 U.S.C. sec. 112.

The Federal Circuit (which hears patent cases) has recognized patents --that is the patent threshhold is meet--so long as the claim, as construed, is "amenable to construction," and the claim, as construed, is not "insolubly ambiguous." Merriam-Webster defines "insoluble" as "cannot be dissolved in a liquid" and "not able to be solved or explained". What is "insolubly ambiguous" is a mystery to me and a huge pay-day for patent attorneys and their law firms. So, what did the U.S. Supreme Court have to say about this standard? Here are the bullets:

The Federal Circuit's "formulation, which tolerates some ambiguous claims but not others, does not satisfy the statute's definiteness requirement."

They proposed a new standard, which goes like this:

"[W]e hold that a patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention."

It appears that the initial inquiry for definiteness involves evaluating the claim(s) "from the perspective of someone skilled in the relevant art.

Second, "in assessing definiteness, claims are to be read in light of the patent's specification and prosecution history".

​Third, "definitiness is measured from the viewpoint of a person skilled in the art at the time the patent was filed.

Here, Nautils argued that the patent --of the opposing party--was invalid and that "definteness" fails when a claim is "ambiguous, such that readers could reasonably interpret the claim's scope differently." Biosig and the Solicitor General would require only "that the patent provide reasonable notice of the scope of the claimed invention."

Nautilus' counsel was asked whether the challenged claims where "amenable to construction" or "insolubly ambiguous"; the answer was, of course, favorable to their client and position.

The Court therefore created this new four-prong standard and observed that it agreed with Nautilus and its amici "that such terminology can leave courts and the patent bar at sea without a reliable compass." More on point, the Court observed that "Nautilus maintains that the claim term "spaced relationship" is open to multiple interpretations reflecting markedly different understandings of the patent's scope, as exemplified by the disagreement among members of the Federal Circuit panel. Biosig responds that 'space relationship,' read in light of the specification and as illustrated in the accompanying drawings, delineates the permissible spacing with sufficient precision."

This case has been remanded so that the Court of Appeals "can reconsider, under the proper standard, whether the relevant claims in '753 patent are sufficiently definite."

As some lawyers (and some others may say), "the Court punted". The compass they provided is not--in my opinion--any better than the "insoluble ambiguity". Furthermore, the case exemplifies the importance of drafting claims and the vague standards and problems that arise in these high dollar cases where the defendant raises the ambiguity argument to defeat the infringement and damages claims brought by a plaintiff.

The subject of commercial real estate is not one I have posted on ... so, it is time to post something on commercial real estate. Multi-family housing seems like a good starting point. I picked a Chelan County posting where the purported cap rate is 8.0%, which is a bit generous (currently) for this type of investment. I ran the numbers and made some assumptions about the expenses. Was the asking price consistent with the 8% cap rate?? No, not even close. A buyer buying into that would have seriously overpaid.

The following is a summary of a quick analysis done to test the purported number.; the price consistent with an 8% cap rate, based on my calculation and estimates, is shown below:

Another book in the proverbial plate to review is Data Analysis with Microsoft Excel by Berk & Carey. Wow! This is a book that Sheldon Cooper from the Big Bang Theory might find interesting and useful to detail the information from observations made using his linear particle accelerator. Ha! In all serousness, it looks like a good read and useful information one can incorporate into the practice.

I am in the process of bidding for a project with an SBA 7a lender. That is not an estate or gift valuation. Furthermore, there is a significant difference between a calculation and a valuation; the fomer involves abbreviated procedures ad costs far less!!!

With the SBA 7a program, the lenders will call asking for the project now, not in 2 weeks. They want the project now. Now is not always possible; there are "honey-do" jobs and other family obligations that may impede undertaking a vauation. SBA SOP's require a valuation, not a calculation! Further, the people preparing the valuation mut be accredited by one of three accrediting orgs; I have a CVA (Certified Valuation Analust) designation and the experience needed to bid for this type of work.

That said, historically, the banks and SBA 7a lenders have contracted with the lowest priced service providers. These services providers are (in my opinion) valuation mills. Invariably, they do not conduct a site visit, interview management, key employees, look at contracts, assess the competitors (local, regional or national) and their competitors' strength, weaknesses, and assess the subject company's owner's and employees ability to respond to change or new competition. In 99% of the mill reports, there are some gapping holes. The SBA 7a lender buys the "valuation" project for $2,300 to $3,000.

While the "mills" (these are national firms) are staffed by accredited professionals, that fact provides little solace to the buyer that may over pay or the bank that will be left with a business. Sometimes, the valuation leads to a lower price. That is the valuation missed important points that are important and set the firm in question apart. Ultimately, it is bank that hires the valuation expert and makes a judgment call. In law, that is the equivalent of hiring a newly minted attorney to handle a complex tax or matrimonial matter. Good luck.

One case worth reading, because in the area of tax, estate and gift and M &A, the courts are beginning to understand that valuation professionals are not all the same (just like, there is a difference amongs attorneys), is Herbert v Kohler. The critique helps explain the risks of cutting corners. http/ustaxcourt.gov/InOpHistoric/kohler.TCM.WPD.pdf. The case does not get into understatement penalties and other risks that are very real. In a recent case, aggressive valuation and appraisal professionals were called on their judgment and ... have been banned from ever appearing before the US Tax Court. These professionals are now (possibly/very likely) going to loose their professional licenses. If they loose their licenses ... they had it coming! (Sorry for being harsh)

Going for the lowest cost providers is an option and there are risks that may end up costing alot. Central Washington Appraisal, Economic & Forensics, LLC is a new firm in Central Washington. We compete on value and are reasonably priced. We also provide USPAP machinery and equipment appraisals. We bring experience but ... as a start up in Central Washington, we want to build a business and establish relationships. Call us and let's visit if pricing is an issue in our bid. Thank you!

Judge Laro is a pre-eminent US Tax Court judge that authored the Mandelbaum opinion. He has been active with the different business valuation and appraisal societies. He is back in the news. He has called for a new way of eliciting the testimony of experts, this proposed method is referred to as "expert hot tubbing".

This is an approach that would work well in other venues. One other option not used frequently enough is for the court to retain its own expert. That possibility could reduce the intensity of litigation and impression that the expert's are really not impartial. Will experts temper their judgment if they know the court has its own expert and/or the court will "hot tub" the experts. Whether this is adopted in WA is an open question (in my opinion).

This topic is one that could be of interest to my fellow NACVA BV professionals and the Chelan-Douglas Cty Bar Association. I have reached out and let's see if they are active and if they are active, the level of interest in this and other topics. A roundtable discussion could work well--I think--if there is an interest.

Again, the focus is on quantifying damages, but today the focus is not so much on Panduit, but of the Georgia-Pacific factors and the hypothetical negotiation to arrive at a reasonable royalty rate. The EMV rule is also being discussed.

Good webinar by Rick Bero, a seasoned expert witness from Wisconsin. This is also a good review of the subject matter. I am unsure whether to use this for a WA State NACVA Chapter meeting.

It is Thursday and I am listening in on this webinar that is being presented by Michael Pakter (Chicago) and Michael Kaplan (Los Angeles). Both, whom I know, are terrific experts and readily available to answer questions. The two are pitching the MastersAnalyst in Financial Forensics (MAFF), which is offered by NACVA. This is a program that I took and includes a mock jury trial where the jury will grade counsel and the experts. It is worth attending, especially for attorneys and those hoping to be expert consultants and witnesses.

Thursday, May 8, 2014

11:00 a.m. Central time (CT) and 12:00 p.m. Eastern time (ET)

These Commercial Damages and Lost Profits Webinars, together with the Legal Theory and Case Law Webinar and Forensic Accounting/Investigative Methodologies Webinar, and the Litigation Bootcamp for Financial Experts live training, are required for individuals seeking the Master Analyst in Financial Forensics (MAFF) credential. Applicants must also meet prerequisite requirements and pass the MAFF proctored exam.

Program Content

Financial forensics experts are often typically called upon in these matters to review and analyze the underlying foundational evidence and measure the lost profits and other related damages. For an expert’s analysis and conclusions to survive the rigors of the litigation environment, the expert’s work must be within the realm of conventional damages theory and be based upon generally accepted approaches and methods of damages measurement. In addition the calculation of lost profits and other recoverable business damages are typically governed by federal, state, or other jurisdictional code sections and case law.

These Commercial Damages and Lost Profits Webinars of the MAFF curriculum focus upon the foundations and fundamentals of economic damages measurement, including alternative approaches and methodologies, notable code sections and case law, foundational evidence and research sources, reporting guidelines, and strategies embraced by the most effective economic damages experts. Financial experts are retained, among other areas, to perform, review, or opine on damage calculations. Different legal theories allow for different measures of damages. This specialty module will explore the accepted approaches used for the various types of economic damages as well as the accepted methodologies of damages calculations.

Focus of the curriculum will be on lost profit calculations, lost business value versus lost profits, and accounting for different industry and loss scenarios. The instructors will examine models and cases used in the measurement and presentation of economic damages, including economic and industry data. They will also provide an understanding of the integration of statistical and economic concepts into the formation of damages models.

Learning Objectives

After completing this session, attendees will be able to:

Apply the traditional methodologies used for economic damages

Explore and evaluate alternative approaches in the measurement of damages

Apply models used in the measurement and presentation of economic damages

Identify sources of information, including economic and industry data

Integrate the use of statistical and economic concepts into damages models

Discuss case law that impacts damages measurement

Who Should Attend

CPAs, valuation experts, economists, and other financial professionals who render services designed to assist in the resolution of legal disputes involving financial matters.

The Commercial Damages and Lost Profits Webinars are required training to obtain the Master Analyst in Financial Forensics (MAFF) credential.

Presenters

Michael Kaplan, CPA, ABV, CVA, MAFF

Rebekah Smith, CPA, CVA, MAFF, CFF

Howard Zandman, CPA, CFF,

If you are in a damages or lost profits case, contact us at Central Washington Appraisal, Economic & Forensics, LLC at (509) 679-3668, we can advise on the value of the case and assist with strategy. Yes, there are upfront costs, but the information provided shapes the strategy and is cost effective. In fact, the case may settle.